12/11

5 Reasons Sirius/XM does not need to fear Pandora

Pandora and other online radio pure-plays want to be in the car, and that will mean trouble for Sirius/XM, right? After all, Pandora et. al. are free while Sirius/XM is not.

Not so fast.

Here are five reasons why that logic could be all wet:

1.  Sirius/XM is destination programming.  For Pandora, the destination is me.

That is, personalized radio services solve one problem really well, but they don’t solve all problems equally well.

Tons of Sirius/XM listenership is for professional sports, news and talk, or premium branded content like Howard Stern or Rosie or (now) Dr. Laura.

Just because I can make my own movie at home doesn’t mean I won’t look forward to Green Hornet in the theater, know what I mean?

2.  Pandora requires usage, while Sirius/XM only requires subscription

In other words, it doesn’t matter whether or not I use Sirius/XM – it only matters whether or not I pay for it. Ironically, Pandora’s utility is a function of my actual usage of it since there is no price point to factor into my decision-making.

And the beauty of being built into cars is that I don’t have to decide whether or not I want to subscribe to Sirius/XM – I only need to decide whether or not I want to DROP my subscription.  And as anyone who sells subscriptions will tell you, dropping a subscription you have is as hard as adding one you don’t have.

The Sirius/XM decision, therefore, weighs the cost of the service against one or two of the premium values listeners get from it.  That’s all it takes, just one or two.  That’s why, for example, HBO could air color bars all week long, but as long as it features a new episode of True Blood on Sunday nights (or whatever the hot show of the moment happens to be), I will keep my subscription until the end of time.

3.  Sirius/XM has a big head start in cars

Here are the recent stats on Sirius/XM’s penetration into the auto market:

The has satellite radio installed in approximately 60% of the vehicles sold, and almost 47% of consumers exposed to the service elect to become self paying subscribers after their promotional period ends.

That’s a big head start, no matter how many folks have Pandora et. al. installed on their mobile devices.

Plus, merging the technology in your pocket with the technology in your dash may not be hard, but any pain inspired by any amount of extra effort creates an obstacle to growth.  Compare that to…

4.  Sirius/XM is as easy to use as radio is (assuming you don’t have to install it yourself)

The fact that almost one out of two OEM subscribers sticks with the service after their trial ends compares to the tiny percentage of folks who walk into a Best Buy, play with a Sirius radio, and walk out with one in a bag. Installation is a pain in the neck.  But not saying “no” to your subscription and flipping a switch on the same dash that already contains your radio is easy.

Further, as brainless as the Pandora process is, it’s still more work to create a series of stations and tailor them to your tastes than it is to punch a button or even a series of buttons on your dash, just like we’ve done for generations.

And even if you argue it isn’t harder, it sounds harder to the uninitiated.

5.  Sometimes you want someone else’s channels, not yours

As I have long argued, having a bunch of choices rounds to infinite choices. That is, for most folks it’s not about creating a custom this or that, it’s about putting in a small amount of work to get a “good enough for me” content stream.  As with all decisions, consumers will measure the effort against the value of that effort, and customization’s value must be worth its cost in terms of effort.

For some, it just isn’t.  Especially when they’re trying to drive from here to there.

Sometimes, good enough really is good enough.  And I’d prefer you to do the work so I don’t have to.

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  • Ric Hansen

    Not to forget the human element that Sirius/XM provides. The music shows for the most part, come complete with a companion and a sense of connection with the outside world. Not just a music player. I have come to know and like the Morning Mash up crew on Sirius hits one. Music, fun and still no commercials. This comes from a long time terrestrial radio guy

  • David K.

    I agree the human element is what radio is all about. The feeling being apart of a community, talking with your friends about what happened on a show or gaining insight from the DJ's. The modern muzak services or mp3 on shuffle don't provide this. Morning Mash, Howard Stern, Jay Thomas, Vin Scelsa's Idiot's Delight, Meg Griffin, My Roots are Showing, NPR shows like Car Talk and Wait, Wait, Don't Tell Me are a just few that provide added value. I look to the programming to introduce me to new and interesting things providing background on a new group or what an old is up to for example. Pandora, Slacker, and others are great if you just want streaming uninterrupted music basically a modern version of muzak with artificial intelligence personalization.

    The other part that SiriusXM has over the current state of cellular mobile live stream content is coverage. You can drive from coast to coast and encounter very limited service dropout with SiriusXM. Cellular outside highly populated areas has limited coverage.

  • MUSCLE13

    Mark – When Pandora gets into the dash how will they make money? I presume it will be audio commercials. Correct? Tough to click on a banner ad while driving.

    How does Pandora compete with Sirius if it ends up imitating the terrestrial commercial laden model?

  • http://www.markramseymedia.com Mark Ramsey

    Good questions. And I will answer even though I'm taking this week off! :-)

    It will be a combination of sponsorship and advertiser supported content. I would argue it should also be a plethora of content more closely related to the Pandora brand and not necessarily the radiocentric model of ads-only.

    For example, if an auto brand can host a concert event, why can't Pandora?

    They have only begun to scratch the surface of value in that brand name.

    To your other questions….

    Interaction while driving is not that tough. A click is really a touch – or even a verbal command. Both of which are part of the driving experience already.

    Pandora will not end up imitating the commercial laden model. They will always limit the commercial load compared to the broadcast model. Plus, they add value to the equation (from customization) that no broadcaster facilitates today.

    Thanks for the question!

  • Guinness421

    I canceled my Sirius subscription last year after enduring endless DJ interruptions. While recovering from throat surgery at home I decided to keep track with a stop watch how much talk vs how much music was played each hour on The Loft. A full 10 minutes of each hour was lost to DJ citing the previous playlist ( which is already displayed on the remote) and mostly forgettable musings. Sunday night when music was a sought after accompaniment to a home cooked dinner, blather from Vin Scelsa’s Idiot’s Delight scarfed up a full 20 minutes of music programming. Today was my first day listening to Pandora at work and I heard much more quality music than I ever would have received from Sirius – for free, though I would have gladly paid them the same fee I paid Sirius. I suppose if trivial DJ minutiae is a desirable side dish of streaming radio, it won’t be long that movie theaters featuring on the hour commercial breaks will also be preferred because of their human element.

  • http://www.markramseymedia.com Mark Ramsey

    Yes, one man’s valuable content is another’s “forgettable musings.” The key is to minimize the latter while maximizing the former.

  • John Phillips

    This article is insultingly dumb and biased. If it wasn’t written by a SiriusXM employee it could have been. There are only 2 plausible reasons to keep a pay service when free alternatives are available. Either you love the exclusive content such as Howard Stern or you want talk or sports which Pandora does not [yet] offer. I do subscribe to XM Nav Traffic but even that is a novelty since I don’t need help in determining the ever sad state of Atlanta traffic. I will say, however, that whenever I have dealt with SiriusXM customer service it has been a pleasure. For that reason I would like to use their service but at the end of the day it’s a value equation for me and, sadly, SiriusXM does not compute.

  • http://www.markramseymedia.com Mark Ramsey

    I’ll never understand why people throw around terms like “dumb” at folks they don’t know. As for “biased,” well it’s a blog post, not a segment on PBS News Hour.

  • John Phillips

    You’re right, Mark. I felt bad about this post as soon as I submitted it. I was wrong to attack the messenger. Please pardon my zeal. I get a little worked up with this topic because I really do want to like SiriusXM. They have great customer service and the radio is already in my car. But how can they really expect to compete in the modern era by force feeding their customers a smorgasbord of dubious channels when most only want a select few? This is the Comcast and satellite TV approach and I believe it is [or will soon be] dead. Unfortunately I don’t see the value in satellite radio unless you’re either listening to sports in your car or are an avid Howard Stern fan.

  • http://www.markramseymedia.com Mark Ramsey

    John, I don’t think you should underestimate the power of the free trial built into the new car. That makes saying “no” to Sirius much more difficult for consumers than saying yes.
    Also, much of the real demand for their service is with the non-music content – Stern and sports. Those alone may justify the fees. The rest of the package “comes along for free.”

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